What is Life Insurance?

By Toni

As we get older, we have to start worrying about different types of insurance. Once we get a car we must look into car insurance. Once were out on our own financially, we must look into health insurance. Finally, when were old enough to start worrying about our own death, life insurance comes into play. Many people don’t have a good idea of what life insurance actually is, which is a shame because it leads to many of them being taken advantage of when a little reading would’ve cleared the issue up for them.

Life Insurance (noun) – At its simplest, life insurance is simply an agreement between you and an insurance company. Upon your death, the insurance company will pay someone you designate a certain sum of money. While death is the most common scenario for life insurance, some policies also include provisions for terminal illnesses or accidental situations.

Life insurance works on a premium basis. If you’re used to paying premiums for health insurance, you’ll have a good idea of how life insurance rates work. As the purchaser of a life insurance policy, you can rest easy knowing that upon your death your loved ones will be well taken care of. This is the primary reason why people purchase life insurance. After all, once you’re gone, the troubles of the earth are no longer your concern. But if you do have family or friends that you would hate to see you left in the cold, life insurance is essential.

Types of Life Insurance

Don’t consider purchasing a plan until you truly understand life insurance.

All life insurance pays out after death or a significant event (depending on the policy terms). However, some are also used as investment vehicles in order to amass savings. This difference is between (1) Term life insurance and (2) investment-based insurance.

  1. Term life insurance is simple and straightforward. A term policy provides insurance for a set number of years with a set face value.
  2. Whole life, universal life, or variable life are sometimes perceived as an investment vehicle and used for asset protection (the intelligence of this is debated).

Life Insurance is complicated

Life insurance is complicated. Before you make any hasty decisions, you must understand that there are a great deal of variety in the types of policies that you can get the smartest thing to do would be to compare rates offered by different life insurance companies. This way you will understand the full line of policies you can select from, along with the companies that provide them. You get a better idea for the life insurance market.

In the end you will be purchasing a product that you are comfortable with, while saving money for you and your loved ones.